Keystone Manufacturing Company, Inc., et al.

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IK THE MATTER OF KEYSTONE MANUFACTUmNG COMPANY , INC., ET AL. CQ-:SENT ORDF.R, ETC., IN REGARD TO THE ALLEGED VIOLATION OF SEC. 2(d) OF THE CLAYTON ACT Docket 7118. C01nplaint, Apr. 10, .1958-Dccision, Mal, 1959 Consent order requiring" manufacturers of home movie equipment, slide projectors, and related items, with sales in 1955 in excess of $10 000 000 , to cease paying special allo wances to a large Pennsylvania jewelry chain for advertising their products while not making' such allowances available on proportionally equal terms to competitors of the chain. Count II of the complaint charging said jewelry chain with lmowingJy inducing and receiving the aJJowarH'cs in question was settled by a consent order on Dec. 18, HISS, p. 885, herein.

COMPLAINT The Federal Trade Commission, having reason to believe that Keystone ?Vlanufacturing Company, Ine. , a corporation, and Keystone Camera Company, Inc. , a corporation, have violated and are nm\! violating the provisions of su bseciion (rl) of Section 2 of the Clayton Act (V. , Title 15, Section 13), as amended by the Robinson-Patman Act, and the Commission having further reason to believe that Associated BmT Stores, Inc., a corporation and Myel' B. Barr, as an individual and as president of Associated Barr Stores, Inc. , have violated and are now violating the provisions of Section 5 of the Federal Trade Commission Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint st.ating its charges wit.h respect thereto as follows; Count I PARAGRAPH 1. Hespondents I-\eystone Manufacturing Company, Inc., and Keystone Camera Company, Inc. , hereinafter sometimes referred to as responded-ts Keystone Companies, are corporations organized, existing, and doing business under and by virtue of the laws of the Commonwealth of Massachusetts with their principal offces and places of business located at Hallet Square, Boston 24, Mass.

PAR. 2. Respondent Keystone 1manufacturing Company, Inc. is engaged in the business of manufacturing home movie equip- Complaint 55 F.

ment, slide projectors, and related items at its factory located in the Commonwealth of Massachusetts.

Respondent Keystone Camera Company, Inc., is engaged in the , slidebusiness oJ distributing and sellng home movie equipment projectors, and related items manufactured by and supplied to it by respondent Kpystone Manufacturing Cumpany, Inc. Respundent Keystone Camera Company, Inc. , is a wholly owned subsidiary of respondent Keystone Manufaduring Company, Inc. Said respondent is an instrumentality of its parent in that its only functions are the distribution and sale of products manufactured by its parent corporation anrl activities incidental to those functions.

Hespondents Keystone Manufacturing Company, Inc., ann Keystone Camera Company, Inc. , operate as one integrated business enterprise rather than as t':vo distinct establishments. Sales made by respondents Keystone Companies are substantial, being in excess 0) $10, 000 000 for the year 1955. PAR. 3. In the course and conduct of their business, as aforesaid, respondents Keystone Companies are now engclged, and for " ismany years have been engaged in commerce as "commerce defined in the Clayton Act, as amended, having sold and disslide projectors, and re-tributed their home movie equipment, lated items manufactured in their factory in l\Iassachusetts and caused the same to be transported from their place of business in Massachusetts to purchasers located in other states of the United States and other pi aces under the jurisdiction of the United States in a constant current of commerce. PAR. 4. Respondent Associated Barr Stores, Inc., is a corporation organized, existing, and doing business under and by virtue , having its principal ofJceof the laws of the State of Delaware and place of business at 1112-1114 Cbestnut Street, Philadelphia, Pa.

PAR. 5. Respondent Associated Barr Stores, Inc., is now and Jar many years has been engag.ed in the operation of a chain of retail je\:velry stores selling jewelry and a variety of other products, including- movie equipment, slide project.ors, and related items to the consuming public. Said respondent operates six retail je\velry stores in and around PhUaclelphia, Pa., and one retail je\velry store in Norfolk, Va.

Respondent Associated Barr Stores, Inc., is affliated with four other corporations, all of which are engaged in the yetaU jewelry business in the Dela\vare Valley area of Pennsylvania and e\v :;.

KEYSTONE MANUFACTURI:-G CO. , INC., ET AL. 1393 1391 Complaint Jersey. It is the practice of said respondent to purchase the merchandise requirements for all these affliales as weJI as for its own requirements. These affJiates arc; Barr s J €\vever. , located in Camden, N. ; Ban, Inc. , located in Chester, Pa. Gemcraft, Inc., located in and around Philadelphia, Fa. ; and Gemcraft of New Jersey, Inc., located1 in and around Camden, N . J. For brevity these affliates win hereinafter som( times be referred to as affliated corporations. In addition to acting as buyer for said affliated corporations, respondent Associated Barr Stores, Inc. , also handles substantially all advertising, including that of the products of respondents Keystone Companies, sold in the stores of said affliated corporations. Sales made by respondent Associated Barr Stores, Inc., are suustantial, being approximately $2 140 000 for the fiscal year ending June 30 1955.

PAR. 6. Respondent Myel' B. Barr, an individual, is president of respondent Associated Barr Stores, Inc. , and personally directs and supervises its policies and operations. Sllb::tantial1y all the stock of respondent Associated Barr Stores, Inc. , and Hg affliated corporations, as hereinbefore 2,et out, is owned by the said Myel' B. Barr and indi\'iclual members of his tamily. The acts and practices 01' respondent Associated Barr Stores, Inc. , as described herein have been and now are under the direct personal supervision of the said :'dyer E. Bait.

PAR. 7. In the course and COn(111Ci of its business in commerce as set forth in paragraphs 2 and 3 above, and more specifically during the years 1953 , 1956 , and 1957 , responde:1ts Keystone Companies have sold and distributed substantbl quantities of and relate(1 items their home movie equipment, slide projectors, to a number of retail dealers in such products in Philadelphia and Chester, Pa. , Norfolk, Va. , and Camden including" respondent Associated Barr Stores, Inc., and affliated corporations. Respondents Keystone Companies have transported lich produds or caused the same to be transported from said respondents' factory in J,lassachusetts or from other places 10catcu outside the Commonwealths of Pennsylvania and Virginia and the State of New Jersey to such retni1er customers, including re- , Jnc. , and its affliated corpora- spondent Associated Barr Stores tions located in the cities of Philarlelphia and Chest.er, Pa., Camden, N. , and Norfolk, Va.

PAR. 8. In the course and conduct of its business as aforesaid 1394 FEDERAL TRADE CO:VIMISSION DECISIONS Complaint 55 F.

respondent Associated Barr Stores, Inc., and its affliated corporations are now and for many years have been in competition with other corporations, partnerships, firms, and individuals located in and around the cities of Philadelphia and Chester, Pa. Camden, N. , and Norfolk, Va. , who are also engaged in the seeing at retail of home movie equipment, slide projectors, and related items manufactured, sold, and distributed by respondents Keystone Companies.

PAR. 9. In the course and conduct of t.their business, as aforesaid, and more specificaEy within the years 1955, 1956, and 1957 respondents Keystone Companies have paid or contracted for the payment of money, goods, or other things of value to or for the benefit of respondent Associated Barr Stores, Inc., and affiliated corporations as compensation or in consideration for services or facilities, including ne\vspaper advertising, furnished or agreed to be furnished by or through respondent Associated Barr Stores, Inc. , and affliated corporations in connection with the handling, sale, or offering for sale by respondent Associated Barr Stores, Inc.) and affliated corporations of the home movie equipment, slide projectors, and related items manufactured, sold Hnd distributed by respondents Keystone Companies, anrll'espondents Keystone Companies have not made available or contracted to make available, or authorized such payments, allowances, or considerations on proportionally equal terms to all other custom- Ers competing with respondent Associated Barr Stores, Inc. , and aHlliated corporations in the handling, selling, or offering for sale of the home movie equipment, slide projeclors, and related items manufactured, sold, and distributed by respondents Keystone Companies.

PAR. 10. The acts and practices of respondents Keystone Companies, as alleg-cd in paragraph 9 above, are in violation of subsection (d) of Section 2 of the aforesaid Clayton Act as amended. Count II PAR. 11. Parag-raphs 1 through 10 of Count I hereof are hereby set forth by reference and made a part of this Count as fully and with the same effect as if quoted here verbatim. PAR. 12. In the course and conduct of their business as aforesaid, and more specifically during- the years J955, 1956, and 1957 respondents Associated Barr Stores, Inc. , and Myel' B. Barr knowingly induced and received, and knowingly contracted for KEYSTONE MANUI"ACTURING CO., n\c., ET AI. 1395 1391 Complaint tbe payment of money, goods, or other things of value to the said respondents and to the affliated corporations of respondent Associated Barr Stores, Inc. , and for the benefit of said respondents and said affliated corporations from respondents Keystone Companies as compensation or in consideration for services or facilities furnished by or through said respondent Associated Barr Stores, Inc. , and affliated corporations in connection with the offering for sale or sale by said respondent and affliated corporations of the home movie equipment, slide projectors, and related items manufactured, sold, and distributed by respondents Keystone Companies in the course of interstate comnlerce, \vhieh payments or considerations respondents Associated Barr Stores Inc., and l\1yer B. Barr kne\v or should have known were not made available on proportionaUy equal terms to all other customers of respondents Keystone Companies competing with said respondent Associated Barr Stores, Inc., and affliated corporations in the retail sale of respondents Keystone Companies' home movie equipment, slide projectors, and related items. PAR. 10. As illustrative of the acts and practices alleged in paragraph 12 berein, altbough respondents Associated Barr Stores, Inc., and IVlyer B. Barr, knew or should have known that during the years 1955 , J956 , and 1957 a11 other corporations partnerships, firms, or individuals competing with saill respondents in the sale or offering for sale of the home movie equipment slide projectors, and related items of the respondents Keystone Companies were limited by said respondents Keystone Companies with regard to the extent to which they would be reimbursed or compensated for ncwspaper advertising undertaken in connection with said respondents Keystone Companies in the advertising oJ said respondents Keystone Companies' products, to an amount of money or other things of value not in excess of 5 ;;1, of the amount of their purchases from respondents Keystone Companies for a given period of time, and also not in excess of 50 i() of the cost of any given advertisement; nevertheless respondents Associated Barr Stores, Inc. , and Myel' B. Darr knmvingly induced respondents Keystone Companies to grant reimlmJ"serncnt or compensation to them in amounts in excess of both the above stated limits with regard to newspaper advertising undertaken by them in connection with the saJe or offering for sale of the products oJ respondents Keystone Companies on numerous occasions during the years 1955, 1956, and 1957. Complaint 55 F.

PAR. 14. On numerous occasions during the years 1955 , 1956 , Inc., and Myer B.and 1957 respondents Associated Barr Stores Barr placed advertisements, including- certain of those referred to in paragraph 13 herein, in newspapers the circulations of which were not limited to the state or states of the United States in which such newspapers were published hut had in addition thereto substantial circulation in one or more states outside the state of publication.

PAR. 15. The acts and practices of respondents Associated Barr Stores, Inc., and Myel' B. Barr as herein alleged are part of an extensive advertising program undertaken by said respondents in conjunction with a large number of suppliers. As a result of this program said respondents have achieved and continue to maintain a dominant position with regard to advertising on the said respondentspart of retailers in the market areas in which are engaged. Such acts and practices enabled said respondents in 1954 to place more advertising space in the three leading newspapers circulated in Philadelphia, Pa., than alj other jewelers competing with said respondents combined. PAR. 16. The methods, acts, and practices of respondents Associated Barr Stores, Inc., and :dyer B. Barr, including the inducing and receiving uf payments for advertising of the products of in inter-respondents Keystone Companies and the advertising state media of such products offered for sale and sold in tbe stores of respondent Associated Barr Stores, Inc., and affliated corporations, knowing that such payments were not made available on proportionally equal tern1S to all other cusLorners competing with respondent Associated Barr Stores, Jnc., and affliated , acts, andcorporations, as hereinbefore alleged, are methods practices in commerce as "commerce" is defined in the Federal Trade Commission Act.

PAR. 17. Tbe acts and practices of respondents Associated Barr Stores, Inc. , and Myer B. Darr, as alleged in Count IJ hereof, of knowingly inducing and receiving payments or allmvances from respondents Keystone Companies that respondents Associated Barr Stores, Inc., and l\1yer D. Barr knew or should have known \were made by respondents Keystone Companies in violation of subsection (d) of Section 2 of the aforesaid Clayton Act, as alleged in Cuunt I hereof, are all to the prejudice and injury of the public, and constitute unfair methods of competition and unfair acts and practices in commerce within the intent KEYSTONE MANUFACTURING CO., INC., ET AL. 1397 1391 Decision and meaning and in violation of Section 5 of the Federal Trade Commission Act.

M?". William II. Smith and M?" James R. F?"lIchterman for the Commission.

Mintz, Levin Cohn by MT. Haskell Cohn of Boston, Mass., for respondents.

INITIAL DECISION AS TO RESPONDENTS KEYSTONE MFG. CO. AND KEYSTONE CAMERA COMPANY, INC. BY ABNER E. LIPSCOMB , IlBARING EXAMINBR The complaint herein was issued on April 10, 1958. Count I thereof alleges that respondent Keystone Mfg. Co. (erroneously referred to therein as Keystone Manufacturing Company, Inc. and its wholly owned subsidiary, respondent Keystone Camera Company, Inc. , hereinafter, together, referred t.o as respondents Keystone Companies, are engaged in the business of manufacturing, distributing, and selling home movie equipment, slide projectors, ann related items; operating as one integrated business enterprise rather than as two distinct establishments, their sales c1uring the year 1955 having been in excess of ten million dollars. Said respondents are charged with violating 2 (d) of the Clayton Act as amended, by paying or contracting for the payment of money, goods or other things of value, during the years 1955 1956 and 1957 , to, or for the benefit of, respondent Associated Barr Stores, Inc. , and its aff1iatecl corporations, as compensation or in consideration for services or facilities furnished or agreed to be furnished by or through respondent Associated Barr Stores Inc., including newspaper advertising, in connection with the handling, sale, or offering for sale by respondent Associated Bait Stores, Inc. , and its affliated corporations of the home movie equipment, slide projectors, and related items manufactured, sold and distributed by respondents Keystone Companies, which payments, allowances or considerations ,,,ere not made available on proportionally equal terms to all of respondents Keystone Companies ' other customers competing with respondent Associated Barr Stores, Inc.

Count II of the complaint, charging unfair methods of competition and unfair acts and practices in commerce in violation of 1;5 of the Federal Trade Commission Act against respondents Associated Barr Stores, Inc., and Myel' B . Barr, relates only to these respondents, with whom this decision is not concerned. Decision 55 F.

On December 12, 1958, respondents Keystone Companies, their counsel, and counsel supporting the complaint herein entered into an Agreement Containing Consent Order to Cease and Desist which was approved by the acting director of the Commission Bureau of Litigation, and thereafter submitted to the hearing examiner for consideration.

The agreement identifies respondents Keystone Companies as corporations existing and doing business under and by virtue of the Jaws of the Commonwealth of Massachusetts, with their offce and principal place of business located at Ha1let Square, Boston, Mass.

Respondents signatory to the agreement admit a1l of the jurisdictional facts alleged in the complaint, and agree that the record may be taken as if findings of jurisdictional facts had been duly made in accordance with such allegations. Hesponclents waive any further procedure before the hearing examiner and the Commission; the making of fmc1ings of fact and conclusions of law; and a1l of the rights they may have to challenge or contest the validity of the order to cease and desist entered in accordance with the agreement. All parties signatory to the agreement agree that tbe record on which thc initial decision and the decision of the Commission shall be based shall consist solely of the complaint and said agreement; that the order to cease and desist, as contained in the agreement, when it shall bavc become a part of the decision of the Commission shall have the same force and effect as if entered after a full hearing, and may be altered, modified or set aside in the manner provided for other orders; that the complaint herein may be used in construing the terms of said order, and that the agreement is for settlement purposes only, and does not constitute an admission by respondents signatory thereto that they have violated the law as alleged in the complaint.

After consideration of the allegations of the complaint, the provisions of the agreement, and the proposed order, the hearing examiner is of the opinion that such order constitutes a satisfactory disposition of this proceeding as to respondents Keystone Companies. Accordingly, in consonance ''with the terms of the aforesaid agreement, the hearing examiner accepts the Agreement Containing Consent Order to Cease and Desist; finds that the CommisEiion has j uriscliction over the said respondents and over their acts and practices as alleged in the complaint; and finds that this proceeding is in the public interest. Therefore , KEYSTONE MANUFACTURING CO. , INC., ET AL. 1399 1391 Decision It is ordered That respondents Keystone Mfg. Co. and Keystone Camera Company, Inc. , their offcerf" employees, agents and representatives, directly or through any corporate or other device, slide pro-in connection with the sale of home movie equipment, is definedjectors, and related items in commerce, as "commerce" in the Clayton Act as amended, do forthwitb cease and desist from:

Paying or contracting for the payment of anything of value to or for tbe benefit of Associated Barr Stores, Inc., or any other customer, as compensation or in consideration for any services or facilities furnished by or throug-h such customer in connection with the offering for sale, sale, or distribution of respondents products unless such payment or consideration is made available on proportionally equal terms to a1l other customers competing in the distribution of such products.

DECISIO"i OF THE COMMISSION AKD ORDER TO FILE REPORT OF COMPLIANCE The Commission having considered the hearing examiner s initial decision as to respondents, Keystone Mfg. Co. and Keystone Camera Company, Inc., filed January 19 , 1959, wherein the hearing examiner accepted an agreement containing a consent oreler theretofore executed by said respondents and counsel in support of the complaint, and entered his order to cease and desist in conformity "with the agreement; and It appearing that said initial decision is appropriate in all respects to dispose of this proceeding as to the respondents named therein:

It i8 ordered That the hearing e: aminer s initial decision ns to respondents, Eeystone Mfg. Co. and Keystone Camera Company, Inc. , flied October 31 , 1958 , be, and it hereby is, vacated and set aside.

It is tnt/het anleTed. That the initial decision as to said respondents, fded January 19 , 1959 , shan, on the 5th day of :llarch 1959 , become the decision of the Commission. That the respondents, Keystone JVfg. Co. 11. ':8 tw.the? onlend and Keystone Camera Company, Inc. , shan within sixty (GO) days after service upon them of this order, file \with the Commission a report, in writing, setting forth in detail the manner and cease and form in which they have complied with the order to desist contained in the aforesaid initial decision. 1400 FEDERAL TRADE COMMISSION DFCISIO/-S Decision 55 F. T.